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I received an offer from my credit card company for a 4.99 percent rate for however long it takes to pay off the amount used during the promotion. This rate is less than the rate I am being charged on a construction loan (9 percent) that I am using to remodel my home. Besides being charged a service fee of 3 percent (max $300), what other pitfalls are associated with this type of loan product? Why would I not want to use this loan as opposed to my construction loan?
— Matthew V., Fayetteville, Ark.

Since home prices began falling and the mortgage market began tightening up last year, homeowners have found it tougher to get loans to remodel. Some are now leaning more heavily on credit cards. No one likes this more than the credit card industry, which is offering all kinds of “deals” to bring in new business.

The problem, of course, is that a credit card is about the most expensive way to borrow from anyone other than Tony Soprano. To help consumers overlook that fact, many card companies offer a low “teaser rate" to get you started. A better term might be a “low rate hook,” because once you’ve borrowed the money you’re on the hook for it — even it the rate goes up. While the marketing brochure may say the rate is “good for as long as it takes to pay the loan,” you can’t really tell for sure until you read the full terms of the agreement, where the type gets a lot smaller and language gets tougher to follow.

Like everything else about credit card accounts, the terms and conditions of these "teaser rate" deals are detailed and vary from one program to the next, so it’s tough to generalize. But it’s common these days for credit card companies to take a very hard line on late payments. In some cases, the contract includes a little clause saying that the card company reserves the right to crank your rate to the maximum — as much as 30 percent — for as long as they like if you’re an hour late with a payment. Some have even taken to applying this rule to all of your bills: If you’re late with your gas bill, that’s as good as being late with your credit card.

It's a wonder the courts have allowed this kind of nonsense to continue. The whole point of contract law is that two parties agree to terms of a transaction before entering into it; the contract then becomes the means of enforcing that agreement if one party tries to weasel out of the deal. Under credit card law, however, there’s a clause that says, essentially, “We reserve the right to change these terms any time we want to. If you don’t like it, your remedy is to cancel your account.”  To do so, of course, you’ll have to pay off your balance immediately.

If you’re considering taking their offer, you need to hammer them hard on the promise to keep the rate steady until you pay it off. It’s not enough to call the customer service line; you’ll get all sorts of verbal assurances that won’t help you after they’ve jacked up your rate and then explain how sorry they are when you call to protest.

So ask to see the written conditions on their promise to hold the rate steady. If they can’t produce such a document, toss the offer in the trash where it belongs. Or you could record your calls with the customer services rep promising they won't raise your rate under any circumstances. Make sure to ask their permission first.

If they ask why, tell them it’s for “quality assurance purposes.”

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